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Investment gold priced in non-US currencies was initially stronger as the Dollar rose to new 2-year highs against the Euro, but eased back as New York trading began.

Speculative traders last week cut their
bearish betting against gold by 10%, shrinking it by one-third from October's near record level, according to data from US regulator the CFTC.

"The shift in positioning," says a note from South Africa's commodity-focused Standard Bank, "suggests that gold has turned, for the moment at least, with a reversal underway in spite of still fairly moribund physical demand conditions."

"As the year-end approaches," says Jonathan Butler at Japanese conglomerate Mitsubishi, "window dressing may lead to further gold liquidation if fund managers dump this year's losers and stock up on better performing assets."

Physical gold investments have returned minus 1% year-to-date. New York's S&P500 index of US-listed companies has risen 12% before dividends are included.

"Commodity index rebalancing may lend some upside support" to gold, says Butler, also noting that physical demand from India may also boost prices "now that import curbs have been removed.

"The net result may be for gold to remain in the $1180 to $1221 range in the near term."

"We have seen the lows and highs for December," agrees London broker David Govett at Marex Spectron, "and will continue to range trade as people stay away from an increasingly erratic marketplace."

Looking at indicative leasing costs for borrowing large investment-grade gold bars in London, however, "Gold forwards [rates have] loosened and on the whole [are] back in a contango again for the first time in a long time," says Govett, attributing the shift back to longer-dated loans being more expensive than short-term deals to "lessening demand for loco London gold at the moment."

Having been negative for 6 weeks running, one-month GOFO rates – a measure of tightness in immediate supplies of London-held stockpiles – ticked up on Monday to their highest level since 28 October, with longer-dated rates all higher.

Silver prices tracked gold meantime, holding 16% down from New Year 2014 below $16.40 per ounce, unchanged from Friday's finish.

Adrian Ash is director of research at BullionVault, the physical gold and silver market for private investors online. Formerly head of editorial at London's top publisher of private-investment advice, he was City correspondent for The Daily Reckoning from 2003 to 2008, and is now a regular contributor to many leading analysis sites including Forbes and a regular guest on BBC national and international radio and television news. Adrian's views on the gold market have been sought by the Financial Times and Economist magazine in London; CNBC, Bloomberg and TheStreet.com in New York; Germany's Der Stern; Italy's Il Sole 24 Ore, and many other respected finance publications.

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